EITC and Child Tax Credit

The Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), which go to millions of low- and moderate-income working families each year, provide work, income, educational, and health benefits to its recipients and their children.

Policymakers have made substantial progress in recent years in “making work pay” for low-income families with children by strengthening the Earned Income Tax Credit (EITC) and Child Tax Credit.

But low-income childless workers — that is, childless adults or non-custodial parents — receive little or nothing from the EITC. As a result, childless workers are the sole group that the federal tax system taxes deeper into poverty.

By making more childless workers eligible for the EITC — including those working full time at the minimum wage — and boosting the credit for workers currently eligible, these measures hold strong promise of increasing employment and reducing poverty.

More than 16 million people in low- and modest-income working families, including 8 million children, would fall into — or deeper into — poverty in 2018 if policymakers fail to make permanent key provisions of two important tax credits.

Some 50 million Americans, including 25 million children, would lose part or all of their Child Tax Credit or Earned Income Tax Credit.

Updated February 18, 2015

Updated February 10, 2015

Background

The Earned Income Tax Credit (EITC), a federal tax benefit for low- and moderate-income workers, reduces the impact of the payroll and income taxes they pay; it also supplements the earnings of very low-wage workers. Building on the EITC’s success, roughly half of the states have enacted state EITCs, which offset state taxes and supplement wages for low-income workers.